Mines & Money Hong Kong Investor Panel

Monday, 23 March, 2015

The first investment panel settled in during day one of Mines & Money Hong Kong 2015. When asked: ‘What are the best regions for mining investment?’ these worthies endeared themselves to the Hong Kong/Asian conference by picking districts such as Nevada, Chile and Namibia.

On the subject of negative risk the Philippines and Indonesia were repeatedly brought up as being ‘difficult’ countries to operate in over the last few years, although there is hope from one of the panel that the domestic regimes are ‘learning’.

The Panel, however, also go on to say that both these south east Asian countries are very important for developing a new generation of major mines, replacing the large producers in the Americas etc. Possibly this is why these countries are so ‘difficult’, as they actual contains something worth having? The central problem also seems to be both countries governments have the unenviable task of having to manage political stability in places with very large, young populations needing jobs. On the one hand, ensuring inward investment assists growth does this, on the other hand seeing huge amounts of wealth going overseas doesn’t.

At this point Stephen Wood from Heritas Capital Management began to talk about the importance of stakeholder engagements and why good government and community relations are imperative for working in Asia. He also believes that picking good, local partners, not necessarily with mining experience but just in running successful businesses, in also an important component for success. All part of the good risk management strategy he says investors should be seeing in mining companies.

The private sector getting it right is only half the problem with sustainable mining development, which then led to Mathew Clearfield from Elaixin Holdings observing that, following a massive turnover of mining executives in China after the 2014 anti-corruption drive, the new ‘team’ is now making its first forays back into tendering and all that goes with full permitting.

Generally speaking the Panel felt that licensing and regulation is getting better in Asia but the failures and contests in Mongolia leave a long shadow of disappointment over the, admittedly very large, ‘region’.

Final Panel thoughts on 2015 is that equity companies need to show a better risk-reward ratio and that PRC money will be coming out (of China) to play, probably sticking to territories close to the mainland to start with.

We asked Stephen Wood of Heritas to expand on how governments like the Philippines are trying to balance tax/royalty regimes with promoting investment. Stephen answered that, putting aside any decision a government might make, companies have to learn to communicate the benefits of project development with the communities around projects themselves.

Such words from the investment community are becoming increasingly common, ‘How times have changed!’ you might say. But ever increasingly risk management at a local level has become of prime importance as capital becomes more scarce and the need for investment success more important. Its that risk/reward ration the investors were talking about, but all risk though, not just geological and metals pricing. '